Currently, capital gains from listed stocks are taxed at 10 per cent, while capital gains from unlisted shares are taxed at 20 per cent. This should be removed to create a level playing field for both listed and unlisted stocks
PHDCCI has released its expectations and industry trends about start-ups in the year to come. these also include recommendations for smooth functioning of start-ups, taxation, and expanding the footprint to tier 2 and tier 3 cities.
- Extend The Scope Of ESOP Taxation Reforms: For start-ups, ESOP’s are key to attract & incentivize talent, these should not be taxed on vesting as recipients do not have ready cash in the hands at that point, the taxation should be on the final Sale of shares.
- Capital Gains Tax Treatment: Rationalise the existing surcharges on LTCG and STCG taxes and consider extended tax exemptions for sunrise and essential categories. Currently, capital gains from listed stocks are taxed at 10 per cent, while capital gains from unlisted shares are taxed at 20 per cent. This should be removed to create a level playing field for both listed and unlisted stocks.
- Start-ups are required to register with multiple authorities before they can claim tax incentives. It is recommended that a single window clearance for start-ups may be provided to claim exemption / deduction under the Income-tax Act.
- Start-ups can get a 100 per cent tax-break for a period of 3 consecutive years out of its 10 years of incorporation. It is common knowledge that in the first 10 years start-ups do not earn any profit. Therefore, this eligibility should be extended to 15 years and for a block of 5 years instead of 3 years.
- Incentives for employee training and development skills to ensure a well-equipped workforce to meet the growing tech skill demand.
- Additional incentives for rural and tier 2 & tier 3 town startups can be provided. It will provide employment and economy development of these places and prevent migration.
- Reduction of GST on Certain Startup Goods & Services: Particularly for Edtech, Agritech, Drones, Electric Vehicle startups.
- Encourage digitization of companies and 100% made-in-India software products. At present, the GST with the full input tax credit is 18% for all software products produced and sold in India. This rate must be tapered down to support indigenous creators of software IP in India.